1

WHAT DOES THE FUTURE HOLD FOR APPLE INC.

AFTER STEVE JOBS ?



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Students :
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Written by Scott Duncan, University of Greenwich
2


WHAT DOES THE FUTURE HOLD FOR APPLE INC. AFTER STEVE JOBS ?


The period from August to October 2011 could be likened to a roller- coaster ride for Apple
Incorporated (Inc.) , its shareholders and other stakeholders. Several gloomy statements
from the company during this time were followed by upbeat announcements. Each was
perceived to affect Apples future prospects and therefore its share price.

The first such statement was in August when Apple announced that Steve Jobs, its legendary
co-founder and Chief Executive Officer since 1997 was retiring with immediate effect
because of continuing ill health. Apples share price fell by 6 percent on the news although it
later recovered. Jobs and the board of Apple handed over the role of CEO to Tim Cook who
had been acting CEO during Jobs earlier periods of medical absence to try and combat his
cancer.

On a happier note, on 4
th
October, Apples management team presented the latest versions of
several key products at a major launch event at Apples headquarters at Cupertino in
California

the iCloud digital storage facility that allows users to store data such as emails,
documents, photos and music remotely and on-line rather than on a computer hard
drive
the latest version of its mobile operating system , iOS 5
updates to the iPod
the latest version of the iPhone , the iPhone 4S.

Whilst the new version of the iPhone undoubtedly included several new and improved
features such as a voice recognition system developed by a company called Siri acquired by
Apple in 2010, a faster dual core A5 processor, a better camera and improved battery life
versus the previous iPhone 4 , several experts expressed disappointment that the upgrade did
not go further . As an example, they pointed out that the upgrade did not improve the phone
chassis. Apple shares initially slipped 5 percent after the launch.

The next day, however, on 5
th
October, Steve Jobs died. He was 56. Tributes poured in from
many of his fans, friends, business colleagues and world leaders including US president
Barack Obama. Bill Gates, founder of Microsoft said The world rarely sees someone who
has had the profound impact Steve has had, the effects of which will be felt for many
generations to come. For those of us lucky enough to get to work with him, it has been an
insanely great honour. Larry Ellison the boss of Oracle the technology software giant said
He was the most brilliant person in our industry. Sir Richard Branson, the founder of
Virgin described him as the the entrepreneur in the world I most admire.

On 18
th
October, an upbeat Apple corporation announced its results for its financial year to
24 September 2011 (described as financial year 2011 or 2011 by Apple and similarly for
earlier financial years). Net sales for 2011 totalled $ 108 billion - an increase of 66% versus
2010, net income after taxes increased to $ 25.9 billion - up 84% versus 2010 and diluted
earnings per share increased to $ 27.68 - up 83% versus 2010. Despite these spectacular
figures, Apples share price quickly dropped by 6 percent .
S
The following day, 19
th
October , Apple stores around the world closed for several hours as
the company held a private service for employees to remember Steve Jobs. The service was
held in Cupertino, California and was webcast to staff worldwide.

Steve Jobs death provided the moment to reflect on where Apple had come from and,
importantly, where it might be going.


Summary of Apples History

Steve Jobs and Steve Wozniak, both college drop-outs, assembled and sold their first
computer in 1976. Wozniak was a self-taught computer engineer. Apple Computer was
incorporated in January 1977 in Cupertino, California and after the success of its computers
offered shares to the public in 1980 and 1981. Apple developed new and improved versions
of their computer range for use by individuals at home (personal computers) and for small
businesses and their first Macintosh computer was launched in 1984.

Steve Jobs left Apple in September 1985 after major disagreements with Apples new Chief
Executive, John Sculley, who had been hired in 1983 and founded a new computer company
NeXT Incorporated . He also bought a computer company called Pixar from Lucasfilm in
1986. Pixar went on to make Toy Story the first animated film made entirely by
computer generated images for Walt Disney studios. After the huge success of Toy Story
and the other animated films made by Pixar, Jobs later sold Pixar to the Disney Corporation
for $ 7.4 billion in 2006.

After a series of Chief Executives in the 1990s and huge losses at Apple in 1996 ($ 816
million) and 1997 (nearly $ 1 billion) , Jobs returned to Apple in 1997 when Apple bought
NeXT for $400 million. Jobs was appointed Chief Executive Officer (CEO) of Apple in
September 1997 and immediately started the work of saving Apple from bankruptcy and
returning the company to profitability .

Under Jobs leadership over the next few years, Apple launched its massively successful
iMac computer range in 1998 and then the products that were to transform Apple from a
computer hardware and software manufacturer into a leader in the information technology
and entertainment sector:

- the iPod launched in October 2001
- the iTunes internet music store in April 2003
- the iPhone in June 2007
- the iPad tablet computer in January 2010.

Summary of Apple Corporation at its 2011 Year End

Apple Inc. and its wholly-owned subsidiaries (collectively Apple or the Company)
designs, manufactures and markets mobile communication and media devices, personal
computers, and portable digital music players, and sells a variety of related software,
services, peripherals, networking solutions, and third-party digital content and applications.
The Companys products and services include iPhone , iPad , Mac , iPod , Apple
TV , a portfolio of consumer and professional software applications, the iOS and Mac OS
X operating systems, iCloud , and a variety of accessory, service and support offerings.
4
The Company also sells and delivers digital content and applications through the iTunes
Store , App Store, iBookstore, and Mac App Store. The Company sells its products
worldwide through its retail stores, online stores, and direct sales force, as well as through
third-party cellular network carriers, wholesalers, retailers, and value-added resellers. In
addition, the Company sells a variety of third-party iPhone, iPad, Mac and iPod compatible
products, including application software, printers, storage devices, speakers, headphones,
and various other accessories and peripherals, through its online and retail stores. The
Company sells to consumers, small and mid-sized businesses (SMB), and education,
enterprise and government customers.

The Companys fiscal year is the 52 or 53-week period that ends on the last Saturday of
September. The Company is a California corporation established in 1977.

= registered trademark


The Legacy of Steve Jobs

The reviews of Steve Jobs contribution and his legacy to Apple started as soon as he
stepped down as Apples CEO in August 2011. The comments by Steve Dineen in Londons
CityAM newspaper on 26 August 2011 were typical. He said of Jobs A man of his talent
and vision will be missedBut Apple is in a stronger position today than it ever has
been. Its rivals rather than encroaching on Apple territory are backing off in key battle
grounds HP (Hewlett Packard ) axing its smartphone and tablet computer operations being
the latest example.

Right now, Apple is king of the jungle, the second most valuable company in the world and
one of only 10 to top the S&P 500. And its all because of one man. Yesterday ( the day that
Jobs stepped down as CEO ), Jobs was being hailed as one of the all-time greats of the
business world worthy of standing shoulder to shoulder with the likes of Andrew Carnegie,
Henry Ford and Bill Gates.

But Jobs has never revolutionised the business world despite envious looks from rivals.
Apple is famous for its vertically integrated business model: the supply chain is tightly
monitored, Apple controls both the platform and software, the distribution and retail. Every
aspect of every product is centrally controlled from Cupertino. The business model
facilitates Apples sumptuous design rival tablets dont compete with the iPad 2 (launched
in March 2011) , they still compete with its predecessor and allowed Apple to command
unbeatable margins.

But Andrew Carnegie had mastered the art of vertical integration 100 years before Jobs
applied the same principles. Carnegie founded the giant US steel corporation, Carnegie
Steel, in the late 19
th
century and his empire spanned coalfields and railroads as well as the
furnaces that produced the steel.

Production techniques pioneered by Henry Ford are still used across the world Apple has
just streamlined them. Indeed the apocryphal Ford quote ( that customers could have any
colour of Ford car they wanted as long as it was black ) could just as easily apple to Apple :
Any colour you like as long as its brushed aluminium.
S
Jobs was renowned for his fierce business acumen, playing hard-ball with suppliers and
developers. But he paled in comparison with Bill Gates co-founder of Microsoft who
struck a famously golden deal to supply an operating system ( MS DOS) to IBM for its
computers and mercilessly exploited the competitive advantage for more than two decades
crushing any competition , often to the concern of regulators.

Dineen continued So why was Jobs so special? Apples chief designer Jonathan Ive once
said New is easy. Doing something better is very hard. And this was Jobs true genius
taking what exists and making it better , cherry picking the best of Ford, a touch of
Carnegie , a sprinkle of Gates and adding to it an unparalleled , unflinching confidence in
his products . Where most of his S&P 500 peers follow the money, Jobs followed the
product confident the money rewards would ultimately flow. When he unveiled the latest
Apple product at one of the legendary product launches in California, he really meant it
when he said I think this is the coolest thing weve ever made. And he was usually right.
Dineen concluded In many respects Jobs was the perfect chief executive visionary,
astute, in command of both the big picture and the smallest detail. He had an uncanny ability
to surround himself by the most talented people: Apple co-founder Steve Wozniak , a
computer wizard of a far higher order than Jobs ; Essex born Jonathan Ive, one of the most
talented consumer product designers of his generation ; his successor Tim Cook , a ruthless
whip and supreme negotiator on the supply side of the business . Cooks unenviable task as
chief executive will not be to take the company in a new direction that would be easy. The
difficult part will be making it better.

A few days after Jobs death, however, another view of him emerged. In an article in the
Sunday Times by commentator John Arlidge headed A world in thrall to the iTyrant,
Arlidge claimed that Steve Jobs was a bullying boss whose best ideas were copied from
others. But he had a gift for giving us easy-to-use products we did not even know we
wanted
1
. The article contained some comments about Jobs that were lessthan-
complementary and similar to an article that appeared in Forbes magazine in September
2011
2
. The Arlidge article continued Even his friends say he was a tough nut. Apple
insiders talk about him as a good Steve, bad Steve changeable boss sometimes praising
sometimes bluntly dismissing staff. He regularly humiliated those he did not think were up
to the mark. When MobileMe, Apples early cloud computing system, suffered teething
problems, he summoned the entire MobileMe team and told them they should hate
themselves and hate each other. It was always Jobs way or the highway! One ex-Apple
engineer recalls Jobs asking him to design a new DVD burning application. The engineer
prepared detailed plans and presentation slides but they werent needed. Jobs apparently
walked into the engineers office, didnt look at any of the work, picked up a marker pen,
went over to a whiteboard and drew a rectangle and said Heres the application. Its got
one window. You drag your video into the window. Then you click the button that says
burn. Thats it. Thats what were going to make. Then Jobs walked out of the office.

Staff and investors accused Jobs of over-obsessive secrecy. CCTV cameras monitor
workers every move at Apple headquarters in Cupertino , California, and the company has
been known to spread dis (false) information about product plans to its own workers. Even
though he was vital to the companys future, he concealed his cancer from shareholders. He
was a control freak.

1
Sunuay Times 9
th
0ctobei 2u11
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Foibes Nagazine aiticle by Kyle Smith, 8 Septembei 2u11
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He also believed that.. the customer is not always right. He (Steve Jobs) was !!!
Apple, unlike most big companies , does not use focus groups to test the reaction to its new
products. When one reporter asked last year what market research went into the iPad, Jobs
said it was his understanding of technology and popular culture. He continued Its not the
consumers job to know what they want.

Arlidge does concede, however, that ...Steve Jobs unique contribution was to make high-
tech so easy that even grown-ups could use it. From the way it is designed to the way it
works it says You know you can do this. Its easy. The driving force behind the elegant
simplicity of Apples products was Jobs.

In a recent biography about Jobs by Walter Isaacson published after Jobs death , Jobs is
also portrayed as constantly striving for almost unachievable perfection in everything he
did. He comes across as a near impossible person to work closely with and prone to severe
mood swings and huge tantrums.


Apples New Management Team

Tim Cook, Steve Jobs successor as CEO, has big boots to fill but has spent years
preparing for the job said James Ashton in the Sunday Times on 9
th
October 2011. Ashton
continued (Apple) investors knew that Apples co-founder was nearing the end when he
handed over the reins to Cook in August. Nevertheless, Jobs passing leaves a giant void at
the top of that company. There is a nagging fear that Apple which redefined the consumer
electronics, music and mobile industries over the last decade may be good, very good but
never great again.

Ashton continued The reason there is concern (at the change in CEO) but little panic, is
that Apple has been preparing for the handover for years. Cook, an expert in supply chain
management, has been in a caretaker role (as temporary CEO) during Jobs earlier periods
of sick leave. Former colleagues say he is not to be underestimated. Cook might not be a
talisman like Jobs, but he shares the same attention to detail, particularly on the customer
services side said an executive who has worked with Cook.

It was also noted by Ashton at the recent October launch event for the new iOS 5 operating
system and iPhone 4S, that Cook did not try and follow Jobs style of dominating the event.
Instead, Cook acted as ringmaster, introducing a string of executives who showed off the
new products. Ashton continued And then there is the next layer of Apple senior
executives . To some observers , they are seen as a band of loyal and long serving
lieutenants , relative unknowns and used to seeing Jobs calling the shots. With more than 30
years of service between them , however, the like of Phil Schiller, Apples chief marketer
and software boffin Scott Forstall are expected to step further out of the shadows.

Other observers have different views about the future management style at Apple.

I accept that when a strong leader goes from a company , you often see the impetus go
we have seen that at Microsoft after Steve Ballmer took over from Bill Gates said Keith
Springer of Springer Financial advisors. He continued But Apple is different . The people
there are part of a strong culture.

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Re-enforcing this view, Tim Cook in his first internal memo as CEO to Apple staff said I
want you to be confiuent that Apple is not going to change. I cheiish anu celebiate
Apple's unique piinciples anu values. Steve built a company anu cultuie that is unlike
any othei in the woilu anu we aie going to stay tiue to thatit is in oui BNA"
S
.

Jessica Mintz, a contributor to www.msnbc.com , is uncertain about the future and said The
departure of Steve Jobs as Apple's CEO raises the question of whether the company will see
changes in its famously insular corporate culture, one that places a premium on secrecy,
opaqueness and a go-it-alone approach. So far, new CEO Tim Cook is promising to leave the
culture unchanged, but that may be a tall order at a company whose identity is so closely tied
up with that of its co-founder and longtime CEO
4
.

Others go even further than Mintzs views. There is bound to be an impact said Rob
Enderle of Enderle Group based in California. Jobs was an integral part of the company.
His hands were on every product they made over the last 10 years. One of the main things
that Cook has already done is to re-instate the philanthropy programme. Jobs had no time for
that. Non critical decisions will be made differently. Also, we will see product erosion.

It seems clear that many aspects of the management style of Apple will remain unchanged.
For example Apples Code of Business Conduct issued to all Apple staff
5
.

Details of the senior executive team reporting to Cook are shown at Annex 4. There has
been no announcement by Apple yet as to who will succeed or take over the responsibilities
of Ron Johnson formerly Senior Vice President of Retail for the last 11 years who left
Apple in June to become CEO of retail giant JC Penney.

In November 2011, most of Cooks direct reports were granted a further 150,000 free Apple
shares as share options exercisable between 2013 and 2016 - as part of the Employee and
Senior Executive Share option scheme.


Corporate Governance

Apples board of directors, their roles outside Apple and the board committees they sit on as
Apple board members are as follows :

William V. Campbell - Chairman and former CEO Intuit Corp.
- Audit Committee
Tim Cook - CEO Apple
Millard S. Drexler - Chairman and CEO J. Crew
- Compensation Committee
- Nominating Committee
Albert A. Gore Jr. - Former Vice President of the United States
- Compensation Committee
- Nominating Committee
Andrea Jung - Chairman and CEO Avon Products

S
See Annex 1 foi full memoianuum
4
See Annex 2 foi full aiticle
S
See Annex S foi Apple's Coue of Business Conuuct.
8
- Board co-lead
- Compensation Committee chair
Arthur D. Levinson Chairman Genentech
- Board co-lead
- Nominating Committee chair
- Audit Committee
Ronald D. Sugar - Former Chairman and CEO Northrop Grumman Corporation
- Audit Committee chair.

The company does not have a Chairman of the Board but has two Co-lead Directors
currently Arthur Levinson and Andrea Jung.

A key aspect of the boards role is to ensure compliance with the laws and regulations of the
countries in which the company operates. An extract of key aspects of Apples corporate
governance guidelines is shown at Annex 5.

At Apples Annual General Meeting in February 2011, the board resisted pressure from
shareholders who requested that all its directors should require 50 percent shareholder
support to gain re-election to the board in line with over two thirds of companies in the S&P
500 who had already done so.

Product Sales Performance

Unit sales and net revenue by product line for financial years 2011, 2010 and 2009 are
shown at Annex 6.

At the 4
th
October event which launched the new iPhone 4S and the iOS 5 mobile operating
system, Tim Cook also provided some key data about the sales performance of several of
Apples product ranges:

there are now 60 million Mac computer users around the world
over 300 million iPods have been sold worldwide since its introduction 10 years ago
in 2001
the iTunes store is now the number 1 music store in the world. There are now 20
million songs and music tracks available for sale from the iTunes library. 16 billion
music tracks have been downloaded since the on-line iTunes store was launched in
2003
There are now over 500,000 software applications (or apps) available to users of
the iPhone, iPad and other mobile Apple devices from Apples Apps store. Apple
has already paid developers over $ 3 billion to develop such apps. Over the last 3
years, customers have downloaded over 18 billion apps from the store.


iPhone 4S and its Prospects

Mobile phones have come a long way in the last couple of decades. From just a calling
instrument, todays mobile phones have become smarter and many - called smartphones
- now undertake all those activities that are performed by computers and laptops including
connecting to the internet, playing music and taking photographs. In 2010, more than 1.5
billion mobile handsets were shipped globally, of which almost 20% or 300 million were
9
smartphones
6
. By 2015, the market research company Synergyst estimates that smartphones
will make up to 45% of the 2.1 billion mobile handset shipments worldwide. This growth
will primarily be due to ever declining smartphone prices as a result of intense competition,
popularisation of application stores and continued adoption of 3G and 4G technologies
7
.

In the second quarter of 2011, it is estimated that 108 million smartphones were sold
worldwide up 7 percent versus the first quarter of 2011. Apples iPhone is estimated to
have been the top seller with a 19 percent share 3 percentage points better than Samsung
which achieved a 16 percent share. This share was achieved before the new iPhone 4S was
launched. Market share details including share by mobile operating system are shown at
Annex 7.

In a June 2011 survey of smartphone users primarily in the USA by the market research
organisation ChangeWave, 70% of iPhone customers rated themselves very satisfied
with the phone. This percentage rating for very satisfied was substantially higher than its
rivals the nearest of which HTC - achieved a 49% very satisfied rating
8
.

Apple does not disclose its profit margins by product line but Deutsche Bank analyst Chris
Whitmore estimates that Apple earns a gross margin of about 70 percent on the new iPhone
4S in the USA . This is based on estimated bill of material costs, the unit sales revenue and
the substantial subsidy per handset that Apple receives from its network carrier partners.
Whitmore also estimates that the iPhone 4S is more profitable than its smartphone
competitors
9
.

The iPhone 4S sold a record 4 million units in its opening weekend that began on 14
th

October 2011. The iPhone range including the iPhone 4S, however, faces or is about to face
some tough competition from major players in the industry :

Samsungs Galaxy S II smartphone was voted Phone of the Year at the
prestigious T3 Gadget Awards in October 2011 based on the votes of almost 1
million respondents . The top-of-the-range Galaxy S II phone which runs the Android
operating system triumphed ahead of the iPhone thanks to its attractive looks,
intuitive operation and unrivalled technical specification including screen and
powerful 8 megapixel camera. Its the first time in three years that Apple or HTC
havent won in this category
10
11

Apple has, however, launched a series of legal challenges against Samsung in 2011
claiming infringement of Apples designs and patents. Almost immediately, Samsung
which is a major supplier of various components and technologies to Apple, launched
a series of counter claims in various international courts saying that it must protect its
own intellectual property which Apple has used and abused without licence or
permission. Samsung alleges that Apple is unfairly using five of its patents that deal

6
uaitnei ieseaich Apiil 2u11
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Syneigyst's "ulobal Smaitphones Naiket Foiecast (2u11-2u1S)" publisheu 1 August 2u11
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Betails shown at Annex 8
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CNN Noney 1u 0ctobei 2u11
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www.telegiaph.co.uk 11 0ctobei 2u11



1u
with communications standards developed by Samsung as well as technology for
wireless data transfers between smartphones and computers
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. On 13 October 2011,
a Californian judge refused Apples request for a preliminary injunction against
Samsungs Galaxy smartphones and tablets but further court hearings are expected in
2012 . A court hearing is scheduled for March 2012 in Australia to try and settle the
disputes there
12
.

Nokia has abandoned its Symbian operating system in June 2011 following a major
collapse in sales and share price and teamed up with Microsoft and its Windows
Phone 7 operating system. The first fruits of this cooperation were announced at the
end of October 2011 the Nokia Lumia 800 and 710 smartphones.

On 19
th
October 2011, Motorola announced the revamp of its top-selling Razr
handset making it thinner and lighter than its previous model and running Googles
Android operating system. This is the first product launched by Motorola since
Google announced the acquisition of Motorolas smartphone arm Motorola
Mobility for $12.5 billion in August 2011.

At the same time, Google revealed the latest version of its Android mobile operating
system codenamed Ice cream sandwich which will go head to head with Apples
new iOS 5 mobile operating system . Samsungs Galaxy Nexus smartphone will be
the first to use the new operating system.

Sony announced at the end of October that it had paid ! 1.05 billion ( 926 million )
in cash to buy out its former partner Ericsson from the SonyEricsson mobile phone
joint venture formed 10 years ago . Sony will take full control of the worlds sixth
largest mobile phone maker and remove the Ericsson name from the products.

BlackBerry manufacturer Research In Motion ( RIM) launched its new operating
system BlackBerry OS 7 which has improved browsing and voice-activated search in
May 2011. Unfortunately for RIM, however, many of its 70 million BlackBerry
users suffered a total and worldwide blackout of communications for several days
during early October 2011. The fault was traced to a software update at RIMs
processing centre in Slough, England. The problem left many BlackBerry users
extremely angry . Large corporations whose executives used BlackBerrys because of
the added encryption and security of the BlackBerry system versus most other
smartphones were particularly annoyed . RIMs profits and share price were already
depressed in the first half of 2011 as a result of lower sales versus the same period in
2010 even before the disastrous communications blackouts suffered by users in
October 2011.

HTC retained its position as number 5 in the world in terms of market share with 11
percent of the global smartphones market in the second quarter of 2011 as a result of
successful models such as the HTC Titan.


11
Fuithei uetails of the law suits aie shown in Annex 9.
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Yahoo Finance anu BailyTech.com 1S Novembei 2u11
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The Chinese telecoms giant Huawei launched its low-cost Vision smartphone on 7
th

November 2011. It uses the Android operating system and will be available in the
UK in time for Christmas 2011.


Prospects for the iPad and the Tablet Market

By the end of September 2011, Apple has sold just under 40 million iPads since it was
launched in 2010. The iPad 2 was launched in March 2011.

Market research company Gartner forecast in September 2011 that:

worldwide tablet sales are on track to surpass 63 million units in 2011 , a 261%
increase over 2010, when 17.6 million tablets were sold
By 2015, sales will reach 326 million units
Apples will sell 47 million iPads in 2011 a market share of 73 %, down from 83%
in 2010
Apple will continue to dominate the tablet market with at least a 50% market share
through 2014 but its share will continue to erode over the next few years as
competitors launch new tablets into the market
Tablet computers using Googles rival Android operating system will sell 11 million
units in 2011 , an overall market share of 17.3% in 2011 - up slightly from its 14.3%
market share in 2010
Android based tablets will close the gap slightly over the next few years, but by
2015, Apple will still be in the lead with 148.7 million tablets sold to Androids
116.4 million.
Beyond Apple and Android, other tablet operating systems such as Microsoft
Windows Mobile will not gain more than a 5% market share.

So far, Androids appeal in the tablet market has been constrained by high prices, weak user
interface and limited tablet applications said Carolina Milanesi, research VP at Gartner, in a
statement. Most of Apple's competitors are struggling to meet Apple's prices without
considerably sacrificing margins. Screen quality and processing power are the two hardware
features that vendors cannot afford to compromise on said Roberta Cozza, principal analyst
at Gartner, in a statement.

A week after this Gartner forecast, however, Amazon launched its iPad killer , said Steve
Dineen in CityAM. a new version of Amazons Kindle tablet called the Kindle Fire which
will have a 7 inch screen, run a custom version of Googles Android operating system and
sell for $ 199 in the USA - less than half the price of the iPad 2 . Unlike the previous Kindle
e-reader, the Kindle Fire will be wi-fi only. It does not come with a camera or microphone.
Analysts say that the aggressive pricing means that the device will almost certainly be a loss
leader with Amazons profit coming from the sale of digital content for the device such as
films, music, apps and e-books purchased through Amazons apps store. It will be available
in the USA from 15 November 2011 but dates for availability outside the USA are not yet
clear.




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At the same time, Amazon also announced

a) a new version of Amazon's classic e-ink Kindle, now called the Kindle Touch.
The new version lacks a keyboard and is smaller and lighter than past models.
The Kindle Touch will cost from $99 for a Wi-Fi-only version. A Kindle Touch
3G, with free cellular service, will cost from $149. Both begin shipping on 21st
November.
b) a stripped-down, entry-level version of the Kindle priced at $79, available from
5
th
November. This Kindle - Amazon's tiniest, weighing in at less than 6 ounces -
carries sponsored advertisements. A $109 version is available without the ads.

CNN Money commented
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If Amazon can unseat Apple as the tablet king - or even make a
dent - it will have pulled off a victory where other power players have failed. In the most
extreme example, Hewlett Packard, killed off its TouchPad last month after just 49 days on
the market. Other rivals are hanging on, but most of their devices have flopped critically and
commercially. BlackBerry maker Research in Motion released its PlayBook tablet in April to
harsh reviews criticising the device's unfinished feel. A major software update which RIM
says will fix some of version1s flaws is due out soon. Two Android-based tablets -
Samsung's Galaxy Tab and Motorola's Xoom - debuted at prices above the iPad's $499 price
point. Their sales have disappointed. And so the iPad has remained largely the only game in
town. A report last month from stockbrokers R.W. Baird said that about 93% of current
tablet users are iPad owners, and 94% of potential buyers are looking at the iPad.

Another challenger to the iPad gained publicity on 2
nd
November 2011, when Stuff
technology magazine awarded its Gadget of the year award to the Eee Pad Transformer
tablet made by Taiwanese manufacturer Asus. This touch screen tablet was launched in April
2011, uses the Android operating system and can be also be used with a detachable keyboard
which boosts battery life
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Apples Financial Results

A summary of Apples financial performance for the 5 years ended 24 September 2011 is as
follows :




Details of Apples financial performance for financial years 2009 to 2011 are shown at the
following Annexes :
- profit and loss account at Annex 10
- balance sheet at Annex 11
- cash flow statements at Annex 12.

Apples annual report for year to 24 September 2011 filed with the New York stock
exchange indicates the following:

- Apple spent $2.4 billion on research and development in 2011 which is up from
$1.8 billion in 2010 and $1.3 billion in 2009.

- Advertising expense was $933 million in 2011, $691 million in 2010 and $501
million in 2009.

- The company currently owns 6.2 million square feet of building space and
leases a further 7 million square feet - a total of 13.2 million square feet .Most of
this space is in the U.S. including Apples data centres in North Carolina and
Newark NJ and 2.6 million square feet of the Headquarters in Cupertino,
California which will be demolished to make room for Apples new spaceship
campus. Apple Retail Stores spread throughout the world account for 3 million
square feet of the leased space.

- At the end of September 2011, Apples balance sheet included $81.6 billion for
cash , cash equivalents and marketable securities up $30.6 billion from $51
billion at year end 2010 and up from $34 billion at year end 2009. Interest
14
income totalled $519 million in 2011, $311 million in 2010 and $407 million in
2009. The weighted average interest rate earned by the company on its cash, cash
equivalents and marketable securities was 0.77% in 2011, 0.75% in 2010 and
1.43% in 2009. The companys marketable securities investment portfolio was
invested primarily in highly rated securities
15
. Almost two-thirds of the cash,
cash equivalents and marketable securities were held by Apples foreign
subsidiaries and were generally based in US dollar denominated holdings.
Amounts held by foreign subsidiaries are generally subject to US corporate
income tax on repatriation to the USA.

- This huge and growing mountain of cash, cash equivalents and marketable
securities has been the subject of speculation for some time. Some analysts
forecast that Apple may use this mountain to start to pay shareholder dividends -
it has paid none to date since its start up in 1977
16
. Others suggest that Apple
may be eyeing a major acquisition.

- Apple opened 40 new retail stores during 2011, 28 of which were outside the
U.S., ending the year with 357 stores open compared to 317 stores at the end of
2010. As of September 24, 2011, the company had a total of 245 U.S. retail
stores and 112 international retail stores. During 2011, the company had an
average of 326 stores compared to an average of 288 stores during 2010. The
average revenue per store increased 27% to $43.3 million in 2011 compared to
$34.1 million in 2010. The Retail segment represented 13% and 15% of total net
sales in 2011 and 2010, respectively.

- Apple had 60,400 full time employees at year end 2011 up almost 30% from
the total of 46,650 at year end 2010 which was a 36% increase from the number
at year end 2009. Analysts believe that the big increase in 2011 was mostly on
engineering staff. Full time equivalent temporary employees and contractors
totalled 2,900 at year end 2011 about the same as year end 2010.

Details of Apples sales, operating income and assets for 2009 to 2011 for each of Apples
five operating regions Americas, Europe, Japan, Asia-Pacific and Retail are shown at
Annex 14.

In a conference call with stock analysts at the time of the release of Apples 2011 results,
Tim Cook also indicated that China is now Apples second biggest market after the USA
where Apple achieved sales of $41.8 billion in 2011
17
.

Apples share price closed at $379.26 per share on 14th November 2011 . Details of the
share price change and of the change versus the NASDAQ over the 12 months to that date
are shown at Annexes 16 and 17. At this share price, Apples P/E ratio is 13.7 based on
historic 2011 earnings. At the 14th November 2011 share price, Apples market
capitalisation was $ 352.5 billion making it the second largest company by market
capitalisation in the world after Exxon who had a market capitalisation of $ 378.5 billion on

1S
Betails shown in Annex 1S
16
Evening Standard article 20 October 2011 What should Apple do with its $81 billion?
17
See Annex 1S
1S
the same date. Market capitalisations and P/E ratios of other major companies in the same
technology sector as Apple were as follows at the same date:

Company Market Capitalisation
-$ billions
P/E ratio (*)
Apple 352.5 13.7
Microsoft 225.1 9.7
IBM 220.8 14.8
Google 198.5 20.9
Memo :
Technology Sector Average
( incl. the above companies)

20.3

* = Based on Earnings per share of previous 12 months
18





Acquisitions by Apple

Apple has made many acquisitions over the years primarily to access the technology,
expertise, skilled engineers and patents of the acquired companies. It has then incorporated
these technologies into its products. Apple generally does not disclose the purchase price of
these acquisitions but an analysis of its financial results indicate that Apple spent $ 244
million on business acquisitions net of cash acquired in financial year 2011 and $ 638
million in financial year 2010.

Apples largest acquisition to date was in 1997 when it acquired NeXT software company
for just over $400 million. This acquisition brought Steve Jobs back to Apple.
Over the years it has acquired:

- computer chip manufacturer PA Semi for around $ 275 million in 2008
- mobile advertising company Quattro Wireless for about $275 million in 2010
- chip manufacturer Intrinsity for about $120 million in 2010
- Siri the company that has developed the voice activated personal assistant
software for use in the iPhone 4S - for about $ 200 million in 2010 amongst other
smaller acquisitions
19
.

The most recent acquisition is of the 3D mapping technology company C3 technologies
based in Sweden in August 2011. It is likely that Apple will incorporate this state of the art
software made by C3 Technologies into its iOS maps app in the iPhone and iPad. The
estimated purchase price was around $ 265 million. In 2011 Apple also purchased $3.2
billion in intangible assets, which likely includes its $2.6 billion share of the Nortel patent
purchase that it went in on with other companies, including Microsoft
20
.


18
Yahoo Finance 15 November 2011
19
Wikipeuia "list of meigeis anu acquisitions" by Apple 9
th
Novembei 2u11
2u
Betails aie shown in annex 18
16
There has been some speculation
21
that the UK technology company ARM Holdings whose
chips and technology are used in a number of Apples products such as the iPhone may be a
takeover target for Apple . ARM achieved sales of 407 million, earned profits after tax of
86 million , had total net assets ( total assets less current and long term liabilities) of 895
million and generated 177 million cash from its operating activities in its financial year
ended 31 December 2010
22
.


Apple and the Environment

Apple demonstrates concern for its impact of the environment and its carbon footprint.
Apples website states:

Apple reports environmental impact comprehensively. We do this by focusing on our
products: what happens when we design them, what happens when we make them, and what
happens when you take them home and use them.

It goes on to say that Apples total Carbon Footprint in 2010 was iesponsible foi 14.8
million metiic tons of gieenhouse gas emissions.

The breakdown of the total carbon footprint was as follows:

Manufacturing:
Manufacturing including extraction of raw materials and product assembly
accounts for 46 percent of Apples total greenhouse gas emissions.

Transportation:
Six percent of Apples greenhouse gas emissions are a result of transporting our
products from assembly locations to distribution hubs in regions where our products
are sold.

Product Use:
The use of our products generates 45 percent of Apples total greenhouse gas
emissions.

Recycling:
One percent of Apples total greenhouse gas emissions are related to recycling.

Facilities:
Apples facilities including corporate offices, distribution hubs, data centres, and
retail stores account for 2 percent of our total greenhouse gas emissions.

Apple also adds that Unlike other manufacturers who may have one or a few products that
are ENERGY STAR qualified, every single Apple product not only meets but exceeds the
United States Environmental Protection Agencys strict ENERGY STAR guidelines for
efficiency. Apple is the only company in the industry that can make this claim. They

21
Lonuon Evening stanuaiu "maiket iounu up" column by Tony uieen 19
th
0ctobei 2u11
22
ARN annual iepoit yeai enueu S1 Becembei 2u1u
17
produce a life cycle assessment which complies to ISO 14000 environmental management
standards: in ISO 14040:2006 and 14044:2006
23
.


Risks

Apple faces many risks as it looks to a future without Steve Jobs. These include the risks
referred to earlier in this case study. Other key risks identified in Apples 2011 annual report
are shown in Annex 20.

The policies of Apples board on the management of risk are shown at Annex 21.


Key Issue

Aftei the stunning success of Apple following Steve }ob's ietuin in 1997 to the company
he co-founueu, will Apple continue to giow anu piospei unuei its new CE0 anu
management team .





2S
Betails of Apple's caibon footpiint anu key enviionmental initiatives aie shown at Annex 19
18

Annex 1



Tim Cooks First Memo as CEO to Apple Staff

Team:

I am looking forward to the amazing opportunity of serving as CEO of the most innovative
company in the world. Joining Apple was the best decision Ive ever made and its been the
privilege of a lifetime to work for Apple and Steve for over 13 years. I share Steves
optimism for Apples bright future.
Steve has been an incredible leader and mentor to me, as well as to the entire executive team
and our amazing employees. We are really looking forward to Steves ongoing guidance and
inspiration as our Chairman.
I want you to be confident that Apple is not going to change. I cherish and celebrate Apples
unique principles and values. Steve built a company and culture that is unlike any other in
the world and we are going to stay true to thatit is in our DNA. We are going to continue
to make the best products in the world that delight our customers and make our employees
incredibly proud of what they do.
I love Apple and I am looking forward to diving into my new role. All of the incredible
support from the Board, the executive team and many of you has been inspiring. I am
confident our best years lie ahead of us and that together we will continue to make Apple the
magical place that it is.

Tim

Souice : www.moconews.net ietiieveu 7
th
Becembei 2u11





19

Annex 2
Page 1 of 2

Possible Changes to Apples Culture ?
Jessica Mintz writing in www.msnbc.com on 25 August 2011 said
The departure of Steve Jobs as Apple's CEO raises the question of whether the company
will see changes in its famously insular corporate culture, one that places a premium on
secrecy, opaqueness and a go-it-alone approach.
So far, new CEO Tim Cook is promising to leave the culture unchanged, but that may be a
tall order at a company whose identity is so closely tied up with that of its co-founder and
longtime CEO.
Jobs is the prodigy who helped build the first iconic personal computer, was cast out and
then returned to build Apple into one of the worlds most valuable companies with his
insistence on sleek design and attention to even the most minute details of user experience.
And he did it all under a cloak of secrecy that only enhanced the products appeal.
Cook is an understated and hard-working leader, the yin to Jobs hot-burning charismatic
yang. Cook, formerly Apples chief operating officer, has been with the company for 13
years, keeping the supply chain in order and production lines running smoothly. Despite the
significant differences between Jobs and Cook, turning the reins over to Cook may prove to
be far smarter, in a cultural sense, than finding a substitute Jobs.
If you try to be Steve Jobs, the next person will never be Steve Jobs. Its an opportunity for
failure, said Mike Mannor, assistant professor of management at the University of Notre
Dames Mendoza College of Business.
Cook faces a tough challenge. Jobs has been given an extraordinary amount of credit for
Apples return from the brink of bankruptcy in the 1990s. That could prove damaging to the
Apple culture now that hes in a less prominent role as chairman, said Jennifer Chatman, a
professor at the UC Berkeley Haas School of Business.
If people believe its the Steve Jobs show, they dont feel as accountable, Chatman said.
In business, the departure of a charismatic CEO can be a disaster or a non-event.
It took Disney four chief executives after Walt Disney to regain its identity and its market
position. For Southwest Airlines, the transition was much smoother. The difference,
Chatman says, is that Southwest founder Herb Kelleher was extremely committed to
sharing the success of the company. The real question we have, because a big part of Apples
culture has to do with secrecy and opaqueness, is to what extent do employees in the
organization feel that they have been responsible for the success of Apple?
Continued on page 2

2u
Annex 2
Page 2 of 2
If Cook were taking over in a normal succession, he would be thinking about how to
solidify his vision and define the next era for the company. But this handover was prompted
by Jobs health problems, and Chatman said its clear Jobs feels he still has work to do at the
company.
That kind of shadow leadership is very confusing for people within the organization. If
Tim Cook is viewed as the future of this company, we need to know where he stands, in a
kind of independent way, she said.
Industry experts say Apple has several years worth of products already in the pipeline, but
eventually, the Cupertino, California-based company will have to come up with the next
gadget for fans to covet. Andrew Hargadon, director of the UC Davis Graduate School of
Management's Center for Entrepreneurship and a former Apple product designer, said he
doesnt fear a lack of good ideas.
The community is great when coming up with opportunities, Hargadon said. The role of
the authority is to say which idea were going to pursue and which others we will not. ... I
think that was Jobs brilliance, keeping them from doing all the possible things out there to
do.
In the worst case, Apple could see a repeat of history. John Sculley, who remained CEO after
Jobs was pushed out in the 1980s, was so desperate to show he was every bit as creative as
Steve was that we ended up with more products, 45 or 50 different products, Hargadon said.
When Jobs returned, he cut the product line down to seven or eight.
In a way, Apple has been rehearsing this moment for years, starting when Jobs took a
medical leave of absence in 2004 to recover from treatment for a rare form of pancreatic
cancer. He has since taken two more health breaks, in 2009 and this year.
Apple has had to contend with what exactly it would be without Steve Jobs there every day.
After the third time, theyve become pretty good at that, said Mannor. From a day-to-day
perspective, the culture has already adapted to what its like without Steve Jobs.
2011 msnbc.com. Reprints
21
Annex 3


Apples Code of Business Conduct


The way we do business worldwide
Apple conducts business ethically, honestly, and in full compliance with all laws and
regulations. This applies to every business decision in every area of the company worldwide.

Apples Principles of Business Conduct
Apples success is based on creating innovative, high-quality products and services and on
demonstrating integrity in every business interaction. Apples principles of business conduct
define the way we do business worldwide. These principles are:
Honesty. Demonstrate honesty and high ethical standards in all business dealings.
Respect. Treat customers, suppliers, employees, and others with respect and courtesy.
Confidentiality. Protect the confidentiality of Apples information and the information
of our customers, suppliers, and employees.
Compliance. Ensure that business decisions comply with all applicable laws and
regulations.

Your Responsibilities
Apples Business Conduct Policy and principles apply to employees, independent
contractors, consultants, and others who do business with Apple. All such individuals are
expected to comply with Apples Business Conduct Policy and principles and with all
applicable legal requirements. Apple retains the right to discipline (up to and including
termination of employment) or end working relationships with those who do not comply.
If you have knowledge of a possible violation of Apples Business Conduct Policy or
principles, other Apple policies, or legal or regulatory requirements, you are required to
notify either your manager (provided your manager is not involved in the violation), Human
Resources, Legal, Internal Audit, Finance, or the Business Conduct Helpline. If you have
knowledge of a potential violation and fail to report it, you may be subject to disciplinary
action.

When facing a tough decision:
Use good judgment. Apply Apples principles of business conduct, review our policies,
review legal requirements, and then decide what to do.
Need some help? When in doubt about how to proceed, discuss pending decisions with
your manager, your Human Resources representative, or the Legal Department. If you
need more support, contact the Business Conduct Helpline.

Retaliation is Not Tolerated
Apple will not retaliateand will not tolerate retaliationagainst any individual for filing a
good-faith complaint with management, HR, Legal, Internal Audit, Finance, or the Business
Conduct Helpline, or for participating in the investigation of any such complaint.

Source:www.apple.com/businessconduct
22




Annex 4


Apples Senior Executives November 2011






CEO - Tim Cook

Eddy Cue - Senior Vice President, Internet Software and Services

Scott Forstall - Senior Vice President , iOS Software

Jonathan Ive - Senior Vice President, Industrial Design

Bob Mansfield - Senior Vice President, Hardware Engineering

Peter Oppenheimer - Senior Vice President and Chief Financial Officer

Philip Schiller - Senior Vice President , Worldwide Product Marketing

Bruce Sewell - Senior Vice President and General Counsel

Jeff Williams - Senior Vice President , Operations




Source:www.investor.apple.com
2S

Annex 5

Page 1 of 3

Extract from Apples Corporate Governance Guidelines :






( Continued on page 2)
24
Annex 5
Page 2 of 3





(Continued on page 3)

2S
Annex 5
Page 3 of 3









Source : www.apple.com


26

Annex 6

Apples Sales from 2009 to 2011








27
Annex 7


MARKET SHARE OF WORLDWIDE SMARTPHONE MARKET Q2 2011

Rank Brand Millions Sold Market Share Q2
- %
Memo :
Market Share Q1
%
1 Apple 20.3 19 18
2 Samsung 17.8 16 13
3 Nokia 16.7 15 24
4 RIM 13.3 12 14
5 HTC 12.2 11 10
6 LG 5.4 5 5
7 Sony Ericsson 5.3 5 5
8 Motorola 4.4 4 4
9 Huawei 4.0 4 2
10 ZTE 2.7 3 2
Others 5.9 5
Total 108 100



SMARTPHONE OPERATING SYSTEM WORLDWIDE
MARKET SHARES Q2 2011


Rank Operating System Market Share Q2 2011 Memo :
Market Share Q1 2011
1 Android 45 35
2 iOS 19 18
3 Symbian 16 25
4 Blackberry 12 14
5 Bada 5 3
6 Phone 7 1 2
7 Windows Mobile 0.5 2
Others 1 1


Source : TomiAhonen Consulting , August 2011
Ahonen takes the average of the big 4 analysis houses - Gartner, IDC, Canalys and Strategy Analytics














28
Annex 8


PERCENTAGE OF SMARTPHONE USERS WHO RATED
THEMSELVES VERY SATISFIED WITH THEIR PHONE






Apple 70%
HTC 49%
Motorola 38%
LG 34%
Samsung - 28%
RIM - 27%
Nokia - 21 %


Source : Survey of 4163 smartphone consumers of whom 89% of respondents were in the
USA and 11% were from outside the USA in June 2011 by ChangeWave research




























29
Annex 9
Page 1 of 3

Samsung versus Apple Legal Battle

The UKs Guardian newspaper reported on 26
th
September 2011 that

Samsungs battle with Apple in tablets and smartphones had entered a new legal stage
and added that The Korean company Samsung could lose orders from the American
company which is its largest single customer as the two wrangle over 'trade dress' and patent
infringement cases.

The article continued :
Samsung and Apple are suing each other in nine countries over 20 cases. Apple first fired
its salvo in April by suing Samsung in a California court, saying Samsungs Galaxy
smartphone and tablet devices infringed Apples mobile technology patents and design.
Samsung shot back with claims of its own and alleged that Apple is unfairly using five of its
patents that deal with communications standards developed by Samsung as well as
technology for wireless data transfers between smartphones and computers.

The growing legal battles between Samsung Electronics and Apple could crimp growth at
the fastest-growing divisions inside the Korean firm, while also worsening its business ties
with its largest customer, analysts have warned.

Samsung and Apple will square off in significant US court hearing in October about an
injunction case in which Apple is trying to block imports of the Galaxy S II smartphone.
Observers say the intellectual property battle with Samsung is part of Apple's broader
strategy of using the courts to help cement the unassailable lead its iPad has in the tablet
market.

The two companies have been locked in an acrimonious global battle over smartphone and
tablet patents since April, and Apple has successfully blocked Samsung from selling its latest
tablets in Germany and some smartphone models in the Netherlands. It has also forced its
rival to delay launching its new Galaxy tablets in Australia until a court hearing scheduled
for March 2012 rules on the dispute in that country.

Apple, which alleges that Samsung has infringed a number of its designs and hardware
patents, and its "trade dress" which refers to how the allegedly infringing devices look. A
key element of the "trade dress" allegations relate to the iPhone 4 and the iPad, and products
from Samsung such as the Galaxy smartphones and tablets.

If Samsung loses another round, that could dent its ambitious attempt to close the gap with
Apple in the global tablet market. The Galaxy gadgets, powered by Google's Android
operating system, are seen as the biggest challengers to Apple's mobile devices.

But the head of the firm's mobile division, JK Shin, said on Monday: "We are confident of
meeting our sales targets for tablets and handsets made earlier this year." Samsung plans to
boost tablet sales more than fivefold this year and sell 300m handsets in all.

(Continued on page 2)
Su
Annex 9
Page 2 of 3

Apple and Samsung are vying for the lead position in the smartphone market, where each
sells more than 20m handsets per quarter, having both overtaken the struggling Nokia.
Samsung also sells simpler "featurephones", where it has also outdistanced Nokia.

Samsung still trails badly in sales of its own tablets, where Apple racked up 14m iPad sales
in the first half, versus analysts' forecast sales estimates of about 7.5m Samsung tablet
products for all of 2011.

Industry discussion suggests that Samsung shipped many more tablets than were actually
sold to end users in 2010. It shipped at least 2m; NH Investment Securities estimates that
customers bought a total of 1.6m.

Analysts say that Samsung could be hit if Apple decides to take its business elsewhere.
"Samsung's tablet business will be most affected and its chip business will also take a hit as
Apple moves to diversify away from Samsung to the likes of Toshiba," said Nho Geun-
chang, an analyst at HMC Investment Securities.

"But taking passive steps for fear of losing its biggest customer will slow down strong
growth momentum at its telecoms business, which Samsung doesn't want to see as the
business is set to become the biggest earnings generator this year and make up for weakening
chip profits. It'll be a costly battle for Samsung."

The South Korean conglomerate supplied Apple with about $5.7bn in components last year,
some 4% of Samsung's total sales. Apple's portion grew to 5.8% of Samsung's sales in the
first quarter, driven by booming sales of iPads and iPhones, for which Samsung supplies
chips, along with Japan's Toshiba.

Analysts said that losing chip orders from Apple would be a longer-term challenge for
Samsung. "For Samsung, [the] biggest concern is reduced order from Apple. Without
Apple's big backing, it would be difficult for Samsung to boost its chip market share
sharply," said HMC's Nho.

"Apple is leveraging the fact that it's got alternative suppliers. They may offer inferior or
more expensive components but it's something consumers barely notice and something
Apple can successfully use to pressure Samsung."

Samsung's smartphone business has been growing rapidly, powered by its flagship Galaxy
lineups. Some analysts expect Samsung to overtake Apple as the world's No. 1 smartphone
vendor and report record profits in July-September, as it has much broader lineups than the
high-end focused Apple.

Samsung's smartphone sales soared more than sixfold in the second quarter, easily eclipsing
Apple's 142% growth, though Apple sold about 1m more units. Nokia sales fell 30%.
Some analysts said Samsung's aggressive stance could help it gain some support from
consumers.

(Continued on page 3)
S1
Annex 9
Page 3 of 3

"These legal battles are raising perception among consumers that Samsung is the only one
capable of competing against Apple," said Choi Do-youn, an analyst at LIG Investment &
Securities.

Despite the global court cases, both companies could end up settling the cases, HSBC said in
a note."The most likely scenario is an out-of-court settlement, after a long-drawn IP battle.
As in the case of the Nokia-Apple dispute, this issue too is likely to be settled out of the
court, after a long drawn legal dispute," said HSBC analyst Daniel Kim.



Source : Guardian newspaper 26
th
September 2011



































S2
Annex 10


Apples Profit and Loss Accounts for Financial Years 2009 to 2011





SS




Annex 11

Apples Balance Sheet for Financial Years 2009 to 2011



S4


Annex 12

Apples Cash Flow Statements for Financial Years 2009 to 2011



SS

Annex 13


Details of Apples Cash, Cash Equivalents and Marketable Securities at Year End 2011








S6

Annex 14


Summary of Sales, Operating Income and Assets by Operating Region





S7

Annex 15

Page 1 of 2


CHINA BECOMES APPLES SECOND LARGEST MARKET IN 2011

Bloomberg News , wrote on 19 October 2011

Apple Inc. said China has become its largest market after the U.S. as the iPhone, iPad and
iMac computer maker opened an online store last year and six retail outlets in the past three
years in the Asian nation.

China, the worlds most populous country, accounted for 16 percent of Apples fourth-
quarter sales, or about $4.5 billion, Chief Executive Officer Tim Cook said on a conference
call yesterday. Revenue in the nation was almost four times the year- earlier level, he said.

Demand in China was a bright spot in Apple earnings reported yesterday, which missed
analyst estimates for the first time in at least six years as iPhone sales lagged behind targets.
The Cupertino, California-based companys sales in the Asian country jumped to $12.5
billion in the year ended Sept. 24 from $2.8 billion the previous 12 months, Cook said.

Ive never seen a country with as many people rising into the middle class that aspire to buy
products that Apple makes, Cook said on the call. China, the skys the limit there.

Apple has a network of more than 200 Apple Premium Resellers in the country that are
focused on the companys products, Cook said. Combined with other types of resellers and
partner China Unicom (Hong Kong) Ltd., the nations only carrier now offering the iPhone
with a service contract, there are 7,000 points of sale for the iPhone in China he said.

Largest Market

Even at that rate, Apple isnt expanding fast enough in China, said Shaun Rein, managing
director of China Market Research Group., a Shanghai-based company that advises retailers
and other clients about doing business in the country.

China should be Apples largest market, and I think they are actually underperforming
here, Rein said. They havent opened enough Apple stores. Apple needs to accelerate store
openings much, much more.

The China market can sustain 100 or more stores easily, Rein said.
Carolyn Wu, a Beijing-based spokeswoman for Apple, said she had no comment on Reins
analysis beyond remarks made by Cook that the company is continuing to make
investments in China.

China is the worlds largest mobile-phone market by subscribers, with 940 million users
registered as of the end of August, according to the nations Ministry of Industry and
Information Technology.
(Continued on page 2)
S8
Annex 15

Page 2 of 2



Feverish Growth

The country probably overtook the U.S. as the largest personal-computer market in the
second quarter, after three decades of American dominance in an industry pioneered by
Apple and International Business Machines Corp., research firm IDC said in August.
Personal-computer shipments in China rose 14 percent to 18.5 million units during the
second quarter, the first time they surpassed the number in the U.S., where they fell 4.8
percent to 17.7 million, IDC said at the time.
Apple sales in China, Hong Kong and Taiwan rose to 12 percent of the companys total last
fiscal year, compared with 2 percent in 2009, Cook said on the call. Revenue is growing at
a feverish pace, in the region, making it the companys fastest-growing by far, he said.

Apple opened its first store in Hong Kong last month, as well as its third store in Shanghai.
The company also has two outlets in Beijing.

Its an area of enormous opportunity, Cook said. It has quickly become No. 2 on our list
of top revenue countries, very, very quickly. Were obviously placing additional investment.
Were building more stores there, as well as doing quite a few other things.
Fourth-quarter profit was $6.62 billion, or $7.05 a share, compared with $4.31 billion, or
$4.64 a share, a year earlier, Apple said yesterday in a statement. That missed analysts
predicted profit of $7.31 a share, the first time Apple disappointed in at least 26 quarters.


Source : Bloomberg, 19 October 2011




















S9




Annex 16


Apples Share Price - 12 Months to 14 November 2011












Source : Yahoo Finance, 14 November 2011


4u





Annex 17


Apples Share Price versus NASDAQ 12 months to 14 November 2011






Source : Yahoo Finance 14 November 2011



41


Annex 18
Page 1 of 2

Courts Agrees Nortel Patent Sale to Apple/RIM group
Reuters reported on 11 July 2011 that
Apple Inc, Microsoft Corp, Research in Motion Ltd and three other leading tech companies
received court approval on Monday to buy wireless patents from bankrupt Nortel Networks
Corp for $4.5 billion.
Judges in the United States and Canada approved the sale of 6,000 patents and applications,
which fetched three times what some analysts expected from the four-day auction in June.
Nortel Networks Corp filed for bankruptcy protection from creditors in January 2009 and
courts in the two countries are overseeing the disposal of the company's assets as the former
telecommunications giant winds down its operations.
The group of six that won the auction, a collection that bid as Rockstar Bidco LP, also
included EMC Corp, Ericsson and Sony Corp.
The auction was "record breaking in terms of this case and in the patent industry generally,"
Lisa Schweitzer of Cleary Gottlieb Steen & Hamilton LLP, which represents Nortel, told a
Delaware Bankruptcy Court hearing.
The auction started with a "stalking horse" bid of $900 million by Google Inc, a company
with a relatively small pool of wireless patents in a booming industry increasingly fraught
with lawsuits over intellectual property.
The price paid after 19 rounds of bidding indicated the lengths the Apple group was willing
to go to thwart the mobile ambitions of Google, according to analysts.
The winning group would likely try to maximize their return on the patents by using them to
litigate against others, with Google and its Android mobile phone software first on the list,
analysts said.
Also bidding were Intel Corp and RPX Corp, which licenses patents to clients for a fee.
Apple initially bid on its own, but partnered with the Rockstar group after round five.
The sale spans wireless, data networking, optical, voice, Internet and semiconductor
technologies. The most prized relate to emerging 4G standards such as long-term evolution
(LTE).
(Continued on page 2)
42
Annex 18
Page 2 of 2

Several large technology companies such as Verizon Communications Inc and Hewlett-
Packard Co objected to the sale. Most objections were resolved by reiterating the sale did not
negate licensing agreements involving the patents included in the sale.
Delaware bankruptcy judge Kevin Gross said it would be a "$4.5 billion mistake" not to
approve the sale.
The money will become part of the Nortel estate and will eventually be distributed to
creditors that range from suppliers to investors holding the company's bonds.
"This is truly a 'wow' transaction," said David Botter of Akin Gump Strauss Hauer Feld LLP,
which represents the official committee of creditors.
The transaction is expected to close in about a month, according to Schweitzer.
The Rockstar group got antitrust clearance on June 23 for the transaction. However, the
American Antitrust Institute has asked the Justice Department for "an in-depth investigation"
into the consortium's patent portfolio purchase.
This sale fetched a higher price than all of Nortel's other asset sales combined. Nortel has
now raised almost $8 billion from asset sales.
The hearing was held simultaneously by way of a telecast with the Ontario Superior Court of
Justice, where it was approved by Judge Geoffrey Morawetz. Nortel is based in Mississauga,
Ontario.
The case is In re: Nortel Networks Inc, U.S. Bankruptcy Court for the District of Delaware,
No. 09-10138.
Source : Reuters , 11 July 2011

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Apple and its Environmental Footprint

Apples website quotes the following :

How Apple calculate its carbon footprint

To accurately measure a companys environmental footprint, its important to look at the
impact that companys products have on the planet. For the past three years, Apple has used
a comprehensive life cycle analysis to determine where our greenhouse gas emissions
come from. That means adding up the emissions generated from the manufacturing,
transportation, use, and recycling of our products, as well as the emissions generated by our
facilities. We've learned that about 98 percent of Apple's carbon footprint is directly related
to our products. The remaining 2 percent is related to our facilities.

Minimizing the impact of our growth.

We know that the most important thing we can do to reduce our impact on the environment
is to improve our products environmental performance. Thats why we design them to use
less material, ship with smaller packaging, be free of toxic substances used by others, and be
as energy efficient and recyclable as possible. So as our growth continues to outpace that of
the rest of the industry, Apple remains committed to creating products that have the least
amount of impact on the environment. Since 2008, as our revenue grew 74 percent, our
greenhouse gas emissions grew only 57 percent. And were the only company in our industry
that can claim that every product we sell not only meets but exceeds the strict energy
guidelines of the ENERGY STAR specification.

Material use

Over the past decade, Apples designers and engineers have pioneered the development of
smaller, thinner, and lighter products. As our products become more powerful, theyre using
less material to produce and generating fewer carbon emissions. For example, although
todays 21.5-inch iMac is more powerful and has a much larger screen than the first-
generation, 15-inch iMac, it is designed with 50 percent less material and generates 50
percent fewer emissions. Even the iPad became 33 percent thinner and up to 15 percent
lighter in just one generation, producing 5 percent fewer carbon emissions.

(Continued on page 2)

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Toxic substance removal.

Designing greener products means considering the environmental impact of the materials
used to make them. From the glass, plastic, and metal in our products to the paper and ink in
our packaging, our goal is to continue leading the industry in reducing or eliminating
environmentally harmful substances.
One of the environmental challenges facing our industry today is the presence of toxic
substances such as arsenic, brominated flame retardants (BFRs), mercury, phthalates, and
polyvinyl chloride (PVC) in products. Although most countries still allow use of these
substances, we have worked with our manufacturing partners to eliminate them from our
products. Not only is every product we sell free of BFRs and other harmful toxins, we have
also qualified thousands of components to be free of elemental bromine and chlorine, putting
us years ahead of anyone else in the industry. In addition, every display we make whether
its built into a system or available as a stand-alone features mercury-free LED
backlighting and arsenic-free glass.

Responsible manufacturing

Apple is committed to ensuring that working conditions in our supply chain are safe, workers
are treated with respect and dignity, and manufacturing processes are environmentally
responsible. Apple also has a Supplier Code of Conduct and publishes supplier audit reports.

Smaller packaging

Apple employs teams of design and engineering experts who develop product packaging
thats slim and light yet protective. Efficient packaging design not only reduces materials
and waste, it also helps reduce the emissions produced during transportation.
For example, the packaging for iPhone 4 is 42 percent smaller than for the original iPhone
shipped in 2007. That means that 80 percent more iPhone 4 boxes fit on each shipping pallet,
more pallets fit on each boat and plane, and fewer boats and planes are used resulting in
fewer CO
2
emissions.

Energy efficiency

A significant portion of greenhouse gas emissions Apple accounts for are produced when
you plug in our products and start using them. Thats why we design our products to be as
energy efficient as possible. Because we design both the hardware and the operating system,
were able to make sure they work together to conserve power. Take Mac mini, for example.
Through innovations both big and small, it uses as little as one-fifth the power consumed by
a typical lightbulb. Mac mini uses even less power than a single 13-watt CFL lightbulb,
making it the most energy-efficient desktop computer in the world.
Apples A5 chip in iPad 2 and A4 chip in iPhone 4, iPod touch, and Apple TV are another
example of energy-efficient design. Apple engineers designed the A5 and A4 chips to be
extremely powerful yet remarkably energy efficient. With them, your Apple devices can
perform complex jobs while maximizing battery life.

(Continued on page 3)
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Page 3 of 3

ENERGY STAR qualification

Unlike other manufacturers who may have one or a few products that are ENERGY STAR
qualified, every single Apple product not only meets but exceeds the United States
Environmental Protection Agencys strict ENERGY STAR guidelines for efficiency. Apple
is the only company in the industry that can make this claim.





Source : www.apple.com/environment
46

Annex 20
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Risks Identified by Apple Inc. in 2011 Annual Report


- Global economic conditions could materially adversely affect the Company.
- Global markets for the Companys products and services are highly competitive
and subject to rapid technological change. If the Company is unable to compete
effectively in these markets, its financial condition and operating results could be
materially adversely affected.
- To remain competitive and stimulate customer demand, the Company must
successfully manage frequent product introductions and transitions.
- The Company faces substantial inventory and other asset risk in addition to
purchase commitment cancellation risk.
- Future operating results depend upon the Company s ability to obtain
components in sufficient quantities.
- The Company depends on component and product manufacturing and logistical
services provided by outsourcing partners, many of whom are located outside of
the U.S.
- The Company relies on third-party intellectual property and digital content,
which may not be available to the Company on commercially reasonable terms
or at all.
- The Company s future results could be materially adversely affected if it is
found to have infringed on intellectual property rights.
- The Company s future performance depends in part on support from third-party
software developers.
- The Company s future operating performance depends on the performance of
distributors, carriers and other resellers.
- The Company s Retail business has required and will continue to require a
substantial investment and commitment of resources and is subject to numerous
risks and uncertainties.
- Investment in new business strategies and initiatives could disrupt the
Companys ongoing business and present risks not originally contemplated.
- The Company s products and services experience quality problems from time to
time that can result in decreased sales and operating margin.
- The Company is subject to laws and regulations worldwide, changes to which
could increase the Companys costs and individually or in the aggregate
materially adversely affect the Company s financial condition or operating
results.
- The Companys success depends largely on the continued service and
availability of key personnel.
- Political events, war, terrorism, public health issues, natural disasters and other
circumstances could materially adversely affect the Company.

(Continued on page 2 )



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Risks identified by Apple Inc. in 2011 Annual Report (Continued)

- The Company may be subject to information technology system failures or
network disruptions that could damage the Companys reputation, business
operations, and financial conditions.
- The Company may be subject to breaches of its information technology systems,
which could damage the Companys reputation, business partner and customer
relationships, and access to online stores and services. Such breaches could
subject the Company to significant reputational, financial, legal, and operational
consequences.
- The Company s business is subject to a variety of U.S. and international laws,
rules, policies and other obligations regarding data protection.
- The Company expects its quarterly revenue and operating results to fluctuate.
- The Companys stock price is subject to volatility.
- The Company s business is subject to the risks of international operations. (1)
- The Company is exposed to credit risk and fluctuations in the market values of
its investment portfolio.
- The Company is exposed to credit risk on its trade accounts receivable, vendor
non-trade receivables and prepayments related to long-term supply agreements.
This risk is heightened during periods when economic conditions worsen.
- Unfavorable results of legal proceedings could materially adversely affect the
Company.(2)
- Changes in the Companys tax rates, the adoption of new U.S. or international
tax legislation or exposure to additional tax liabilities could affect its future
results.

Notes :

(1) = This risk includes the risk of fluctuations in exchange rates versus the US $
(2) = Apple is currently subject to the following legal actions in addition to the dispute
with Samsung
- legal action against Apple in the USA alleging that the company and AT&T
Mobility violated the federal antitrust laws by monopolizing and/or attempting to
monopolize the aftermarket for voice and data services for the iPhone and that
the Company monopolized and/or attempted to monopolize the aftermarket for
software applications for iPhones.
- Legal action against Apple in the USA alleging unlawful tying of music and
video purchased on the iTunes Store with the purchase of iPods and unlawful
acquisition or maintenance of monopoly market power and unlawful acquisition
or maintenance of monopoly market power under various Californian and US
Federal Acts including the Sherman Act, the Cartwright Act and the Californian
Consumer Legal Remedies Act and Californian monopolization law.





48



Annex 21
Page 1 of 2

Apples Board Oversight of Risk Management

The Board of Apple believes that evaluating how the executive team manages the various
risks confronting the Company is one of its most important areas of oversight. In carrying
out this critical responsibility, the Board has designated the Audit Committee with primary
responsibility for overseeing enterprise risk management. A Risk Oversight Committee
consisting of key members of management, including the Companys Chief Financial
Officer and General Counsel, was formed to assist the Audit Committee in fulfilling its
oversight responsibilities with regard to risks inherent to the business of the Company, the
identification, assessment, management, and monitoring of those risks, and risk management
decisions, practices, and activities of the Corporation. The Risk Oversight Committee reports
regularly to the Audit Committee, and the Audit Committee makes periodic reports to the
Board regarding such briefings.

While the Audit Committee has primary responsibility for overseeing enterprise risk
management, each of the other Board committees also considers risk within its area of
responsibility. For example, the Nominating Committee reviews risks related to legal and
regulatory compliance as they relate to corporate governance structure and processes, and the
Compensation Committee reviews risks related to compensation matters. The Board is
apprised by the committee chairs of significant risks and managements response to those
risks via periodic reports. While the Board and its committees oversee risk management
strategy, management is responsible for implementing, supervising day-to-day risk
management processes and reporting to the Board and its committees on such matters.

With respect to risk related to compensation matters, the Compensation Committee
considers, in establishing and reviewing the Companys executive compensation program,
whether the program encourages unnecessary or excessive risk taking and has concluded that
it does not. Executives base salaries are fixed in amount and thus do not encourage risk-
taking. Bonuses are capped and are tied to overall corporate performance, and also are a
relatively small percentage of executive officers total compensation opportunities. The
majority of compensation provided to the executive officers is in the form of long-term
equity awards that are important to help further align executives interests with those of the
Companys shareholders. The Compensation Committee believes that these awards do not
encourage unnecessary or excessive risk-taking since the ultimate value of the awards is tied
to the Companys stock price, and since awards are staggered and subject to long-term
vesting schedules to help ensure that executives have significant value tied to long-term
stock price performance.

The Compensation Committee has also reviewed the Companys compensation programs for
employees generally and has concluded that these programs do not create risks that are
reasonably likely to have a material adverse effect on the Company. The Compensation
Committee believes that the design of the Companys annual cash and long-term equity
incentives provides an effective and appropriate mix of incentives to help ensure the
( Continued on page 2 )
49
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Companys performance is focused on long-term stockholder value creation and does not
encourage the taking of short-term risks at the expense of long-term results. In general,
bonus opportunities for Company employees are capped, and the Company has discretion to
reduce bonus payments (or pay no bonus) based on individual performance and any other
factors it may determine to be appropriate in the circumstances. As with the compensation of
the Companys executive officers, a substantial portion of the compensation for employees
generally is delivered in the form of equity awards that help further align the interests of
employees with those of shareholders.





Source :
Apples 2011 Annual General Meeting of shareholders 23 February 2011
papers to shareholders from Board of Apple Inc.